Consumer: Should I refinance?
The following is a list of reasons for which you might want to refinance:
- Consolidate Debt: interest expense on a mortgage is the only type of interest that is tax deductible. If you have enough equity in your home to do a cash-out refinance, then you might want to consider taking that cash out in order to pay off your other debt. Why pay interest on credit cards and automobiles? Instead pay interest on your mortgage and get a tax break at the end of the year.
- Make Home Improvements: when is the last time that you made surperficial improvements on your home? Or is there something that's been in need of some repairs? Or better yet, are you sitting on a big lot of land that would enable you to expand the number of rooms your property currently has? Do you have enough month-to-month cash-flow to finance these fixtures or additions without having to tap into the equity of your home? The first thing that needs to be done in either of these circumstances is to sit down and analyze the cost of making either of these improvements. Do some shopping around to get price quotes on the expense you might incur. (I might even be able to refer a company or two) Once you have done the math and calculated the entire cost of what it would take to finance any improvements or additions to your property, the next step to determine is if you have the cash-flow to make these improvements. If you don't have the cash-flow on a month-to-month basis to finance the cost, then it makes sense to do a cash-out refinance. But only do this IF you have enough equity in your home to do so. Now taking cash-out to make improvements might scare you because of the high mortgage balance and payment but YOU WILL be getting a return on your investment. Most home improvements add value to your property!
- Transfer out of an ARM into a Fixed Rate Mortgage: do you have an Option Arm or any other type of ARM product for your home mortgage? In regards to the Option Arm, it is a short-term loan aimed at providing higher cash-flow on a month-to-month basis. Do keep in mind that with this loan, you may very well be deferring interest; if you're making the minimum payment. This deferred interest is added to your principal balance each time that you make the minimum payment. It has been my experience that most individuals with this type of loan make the minimum payment thereby deferring hundreds of dollars of interest a month and thousands of dollars a year. By years end, you might end up with a principal balance that is $10,000 greater than when you initial had your mortgage. This type of loan product is for the investor intending to make repairs on his/her property; repairs that would amount to a substantial increase in property value. This type of loan is also for the commission based employee; the individual who might make more money this month than the next. All in all however, the loan is not to be used as a long-term product because what will ultimately result is the consumer oweing more money than his home is worth! As for the other ARM products, they are great loans because they allow the consumer to qualify for a reasonably priced mortgage. BUT, once these 2,3,5, 7 year fixed mortgages convert to the variable rate mortgage, the consumer might be paying more than he/she initially qualified for. So keep track of the date that your mortgage will convert to a variable rate mortgage. Consult with your mortgage provider to determine whether you qualify for a fixed rate loan at a reasonably lower rate and payment. If you don't, you can still discuss strategies in which to bring your credit score to the upper tiers to qualify for that better rate and payment. You'd be surprised how many times individuals can qualify for a lower rate and payment even though their variable rate mortgage doesn't adjust for another year. That's why I say, "Everything that you do should contribute to a strategy!" You might not want a loan right now, but let's take a look at your current mortgage and review your credit so that we can plan ahead for the future and position you into a better overall financial position.
"Everything that you do should contribute to a strategy!"-- RB
Sure it's only home financing, but if we can plan accordingly and develop ways in which to improve your credit grade so that you qualify for a better priced home mortgage, wouldn't you be satisfied? Even if you want to refinance or finance a new property now, my team here at Citinet Mortgage is prepared to expedite your loan so that you're sitting in new or existing home and truly occupying your desired space of peace and comfort. We demystify the financing process for you and work to produce financing solutions that bring you mind at ease!
For a FREE, NO-OBLIGATION Home Market Analysis & Mortgage Review
Contact Me:
RICARDO BUENO
Direct: 323.810.2175
Toll Free: 800.837.1725 ext. 114
E-mail: ricardo.bueno@citinetmortgage.com
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